Agent of change

Virginia Tech Foundation has flourished during CEO’s tenure

Ray Smoot has overseen the transformation of the Virginia Tech Foundation during the past 35 years.

When he inherited the job in 1977 from longtime Tech official Stuart K. Cassell, running the foundation was a part-time responsibility tied to other administrative duties. The foundation had an endowment of $4 million and oversaw assets of $11 million. Now the endowment stands at $600 million, and the foundation has assets worth $1.15 billion. “My guess is that in 1980 the university probably raised maybe $5 million to $8 million a year,” Smoot says. “That number now is $90 million.”

While the foundation does not handle fundraising, it works closely with the Tech development office. The foundation invests money contributed by donors, using revenue from investments largely for financial-aid assistance and support for university programs.

Over the years, the foundation also has acquired and developed real estate. The foundation now owns 17 properties around the state, including the 130-year-old Hotel Roanoke, the Virginia Tech Research Center-Arlington and the Virginia Tech Corporate Research Center in Blacksburg plus the Virginia Tech Center for European Studies & Architecture housed in a Swiss villa.

Smoot notes the Corporate Research Center originally was intended to be an office park for large corporations that wanted access to Tech’s research. Instead, it now is home to 140 companies and research centers employing 2,400 workers. “The research park has far exceeded our goals, but it didn’t work out at all like we thought it would,” Smoot says.

He will retire in July after a Tech career that, in addition to heading the foundation, has included service as assistant vice president for administration, vice president for business affairs, vice president for finance and vice president for administration. He also briefly was interim director of athletics.

Except for three years in the 1970s when he studied for his doctoral degree at Ohio State, Smoot has been connected to Tech continuously since he enrolled as a freshman in 1965. He is a member of the vaunted Class of 1969, which includes Tech President Charles Steger and Head Football Coach Frank Beamer.

John Dooley, Tech’s vice president for outreach and international affairs, will succeed Smoot as CEO of the foundation. In retirement, Smoot will work as a part-time consultant to the university and the foundation on real estate and investment matters. He’ll also devote more time to his responsibilities as chairman of Charlottesville-based StellarOne Corp., a bank holding company, and as chair of the finance and investment committee at Carilion Clinic in Roanoke.

In addition, Smoot says, he plans to fish and indulge his lifelong interest in trains. “I still say when I grow up I’m going to work for the railroad,” he says. In fact, Smoot can watch trains from his home. “That’s just a lifelong dream come true.”

Virginia Business interviewed Smoot at his office in Blacksburg.

VB: What drew you to Tech as a student?

Smoot: I thought I wanted to be an engineer. Turned out I didn’t, but I thought I did. So Virginia Tech was the place that many who thought they wanted to be engineers went back in the mid-’60s. Marshall Hahn had come here three years before as the president. He was 35, by the way, when he became president. Virginia Tech under Marshall’s leadership was on the make, and there was a lot of excitement about it.

VB: Now you’re part of the famous class of ’69, which has lots of folks [in leadership positions at Virginia Tech]. Who else is in that group?

Smoot: Well, of course, there is [Tech President] Charles Steger, [Head Football Coach] Frank Beamer, Joe Meredith who heads [the Corporate Research Center] and Tom Tillar, who is head of the Alumni Association. The truth is that none of us were friends when we were undergraduates. It’s not like we sat around at night thinking about how we could eventually go to work at Virginia Tech. We knew each other, but back then, heck, Tech was a fourth the size of what it is now. But yes, we’ve all had a good ride here.

VB: Are you the first one of them to plan to retire?

Smoot: I am … My decision to retire was based in part and only in part because I became chairman of the StellarOne Bank corporation board, and I want to be able to give that the time that it deserves. Our CEO is retiring next year, so we’re starting through the CEO succession process. And it seemed to be an appropriate time to retire. Probably turning 65 had something to do with it, too.

VB: Looking at your résumé here, you’ve done just about every job on this campus at one time or another.

Smoot: Yes, my wife [Jean] says that means I couldn’t hold any job for very long. When I came back from Ohio State, which was 1975, I came back working for someone who in today’s environment would be called the chief business officer or the chief financial officer, a guy named Stuart Cassell, for whom Cassell Coliseum is named. He had been in that position since the ‘40s. Getting to work with him was just a real treat because he knew where everything was within the university. He died unexpectedly, suddenly, a year later. I’ve always regretted that I didn’t get to spend more time working with him.

That was when I first became involved with the Virginia Tech Foundation, which at that point was a small organization. We kind of ran it out of the desk drawer, so to speak.

When [Cassell] passed away, that part of [his responsibilities] came to me along with some other things on the university side. That led to 35 years or so with the foundation. It has been very gratifying to see how the private support for the university has helped it to do things it never could have done on the state side.

VB: How has that evolved in people being interested and willing to donate to a state-supported university? Did it take an education process to help them understand how that worked?

Smoot: It does, and I should tell you right up front that the Virginia Tech Foundation, and this comes as a surprise to most people, does not raise money. University development raises money. It’s the same model that you’d find at the University of Virginia. However, all the money that is raised comes into the Virginia Tech Foundation, so we work very closely with the development people. The foundation also writes a check to the university each year for $8 million to $9 million to pay for most of the development expense. In other words, we use private money to raise money — not state money.

None of the public universities in Virginia, other than perhaps the University of Virginia, had seriously and professionally approached fundraising until around the early ‘80s. My guess is that in 1980 we probably raised maybe $5 million to $8 million a year. That number now is $90 million.

But I think most people now understand that state universities really receive a fairly small percentage of their total income from the state. Given the need for financial aid, which is probably the largest single source of gifts that we get, it’s not a hard sell. People get excited about what their college or university is doing. The billion-dollar campaign that was concluded last year really generated a lot of excitement. People wanted to be a part of it.

Even in a down economy, it seems that there are people who still have resources and are willing to be generous with those resources. Our campaign perked right along during 2008, 2009, the terrible recession we went into.

VB: Of course, one of the things that has happened in the last 25 years is the success of the football team. How has that made a difference in connecting alumni to the university and helping it raise money?

Smoot: I think it has been very helpful: the success of the football team, membership in the Atlantic Coast Conference. If you look at the money that is raised, about a fourth of it is for athletics, athletic-related facilities. Not all football and basketball, by the way, because as you know, there are other sports, too, that people are interested in. But the lion’s share goes to football and basketball.

But the success of the athletic program, in particular football, has helped to put the university in front of people in a positive way for the most part and has generated excitement. People love coming here to a football game. One thing I think is not generally well understood is how many of the athletic donors are also significant academic donors. It’s not at all unusual to find someone who will endow a scholarship in athletics and a scholarship in business or whatever.

I think the increase in quality of the students has excited alumni and made it easier to raise money. You know, the class of ’69 guys like me, we sort of joke, except in that case it’s probably not a joke, they don’t let people like us in here anymore. Thirty people out of my high school class in Lynchburg came to Virginia Tech [in 1965]. And that’s when it was a fourth the size it is today. The students are just incredibly capable. And the faculty is engaged in leading-edge discovery, research. It’s just an exciting place … we all know the pressures that are on the state budget, so it has really been wonderful to be able to raise the private money to help do some of the things that you just could never do with state support.

VB: How did the real estate and development side of the foundation get started?

Smoot: It got started, I’d say, in two different ways. In the late 1970s, Nancy Susan Reynolds, the daughter of [tobacco company founder] R.J. Reynolds, gave us the R.J. Reynolds homestead, as they called it, down in Patrick County. She also provided an endowment to bring to that location cultural and educational programs serving that part of Virginia.

Not long after that, Marion DuPont Scott, who owned Montpelier [James Madison’s former home in Orange County], got very interested in our equine program at what was then the relatively new college of veterinary medicine. She decided we needed an equine medical hospital in the horse country. She gave the money to the Virginia Tech Foundation and laid out the plan for how we were to build this facility [at Morven Park in Leesburg].

So we got into it from philanthropy, and we also got into it through the need to have a way to quickly build buildings that support programs of the university. For example, back in the mid-’80s, we started the Corporate Research Center where we’ve now developed 1 million square feet of space. That’s not something that the university as a state agency could do or should do. The foundation in essence became the developer, the borrower, and developed that site.

In the late ‘80s, the university wanted a European studies center. Students had been going to Europe for a long time, but we didn’t have any facility over there. The cost was going out of sight. So the notion was we need to buy a facility and have a permanent site. The idea of the university as a state entity buying a building, a villa in Switzerland, wouldn’t have flown very well. The foundation again was asked to do this project … so it was both the interest of donors and the programmatic needs of the university that got us in the real estate development business.

VB: Is there any one project you’ve been involved with here that you would consider your proudest achievement?

Smoot: Probably the Corporate Research Center. What that project is really about is trying to enhance entrepreneurship and innovation in the Roanoke/New River valleys, trying to create good jobs and trying to attract capital to take some of the technology coming out of the university and commercialize it.

The research park has far exceeded our goals, but it didn’t work out at all like we thought it would. What we set out to do in 1985 was to create a window on the university for large corporations who had an interest in research going on there. So they’d want to have offices out there.

Well, it turned out to be some of that happened, but a relatively small percentage [of the total tenants are representatives of large companies]. There are 140 different companies out there, most of which have fewer than 25 employees. So trying to reposition the region into a technology-based, innovative economy has actually worked out reasonably well …

A close second [among proudest achievements] would probably be the Hotel Roanoke project. That turned out far better than many of us thought that it might. I remember when I brought that [plan to renovate the historic hotel], to the executive committee of the [foundation] board, there was this guy named Jack Hancock who was 85 years old. He sat there and listened to this thing about redeveloping the Hotel Roanoke and putting up $28 million.

He said, “Well, old boy,” he would always refer to you as old boy, “Well, old boy, have you ever parked cars for a living?”

I said, “Well, no, sir, I don’t think I have.”

He said, “Well, you better get used to it, because if this thing doesn’t work, you’re going to be running the valet parking operation.”

There was a lot of skepticism about whether that thing was going to work or not. We bring about $600,000 or $700,000 a year out of that project now to help make these other things work. More important than that has been establishing the university in a very prominent way in Roanoke and bringing together the Roanoke and Blacksburg communities.

VB: Now how did that come about? I know the hotel was originally owned by the railroad.

Smoot: Yes. It was a classic old railroad hotel. Part of the reason the railroad owned it, which I don’t think has been generally understood, is [Norfolk and Western Railway’s] corporate headquarters was right across the street. They would use it to bring in coal operators, who back in that era [accounted for] most of their business.

By the late ’80s, it was tired and worn, and the railroad concluded it really didn’t want to be in the hotel business. And of course, Norfolk and Western had merged with Southern, and it was based in Norfolk, not Roanoke.
So the deal was that they would give the hotel to the foundation. We would put together the $28 million package needed to completely renovate and reopen the hotel, and the City of Roanoke would build a $13 million conference center adjacent to it. The conferencing and educational program activity that occurred there would be the margin of difference between the hotel being profitable in the future versus unprofitable in the past.

The hotel runs at about 73 percent occupancy, and any time you can run a hotel over 70 percent, you should make money. [The hotel is managed by the Doubletree Division of Hilton Hotels.]

VB: Is there another major project on the boards that you are working on?

Smoot: We’ve started Phase II of the Corporate Research Center. We will be doing over the next 20 years or so 10 or 15 more buildings in the research park. We also have some architectural engineering work going on over in Switzerland with regard to an addition to the Center for European Studies over there. And I’m sure there is another major project out there that will walk in the door one day.

VB: Now you mentioned one of the reasons you are retiring is you want to spend more time on the chairmanship of StellarOne. What other plans do you have for retirement?

Smoot: I’ve agreed on a part-time, nonexecutive basis to continue to work with the foundation investment and real estate programs. I also serve on the board of RGC Resources, which is the holding company for Roanoke Gas Co. And I plan to spend more time fishing too, and I really mean that.

VB: What other sorts of things do you like to do when you’re not in this office?

Smoot: Watch trains. I still say when I grow up I’m going to work for the railroad. I really do wish I could do that. Down in the valley where we live, I can see the railroad from the house, which that’s just a lifelong dream come true. You can actually watch trains from the house.

VB: Do you ever go over to the O. Winston Link Museum? [The Roanoke museum features iconic black-and-white photos of Norfolk and Western steam engines taken at night.]

Smoot: Oh, yes … Sure, I like trains, but those photographs in one sense are not about trains at all. It’s about life in the ’50s. Rural life in the ’50s for the most part … I’ll tell you a little story. The first photos of his that came to my attention anyway were in a little book that Norfolk and Western Railroad published. It was a soft-cover book, about 20 of these photos that were taken in about 1957, ’58, ’59.

Well, I and several of my friends in Lynchburg said, “If he can do that, we can do that, too.” We decided one night we were going to photograph a train coming into Lynchburg. And we set up this long thing of flash bulbs. We had them strung down through the trees, and here comes the train. The things go off. Well, in about five minutes the police were there. They thought something had blown up. They said, “What are you all doing?” And when we told them, it made absolutely no sense. It was like worse.

VB: Did you get a picture?

Smoot: No. The picture wasn’t worth 2 cents. If it had been, I would probably still have it.